United States District Court for the District of New Jersey
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Case 2:16-cv-04981-WJM-MF Document 81 Filed 05/06/19 Page 1 of 12 PageID: 1662 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY FRED WALFISH, Plaintiff, Civ. No. 2:16-cv-4981 (WJM) v. OPINION NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY and NORTHWESTERN MUTUAL INVESTMENT SERVICES, LLC, Defendants. WILLIAM J. MARTINI, U.S.D.J.: Plaintiff Fred Walfish (“Plaintiff” or “Walfish”) is an insurance agent who was associated with Defendants Northwestern Mutual Life Insurance Company and Northwestern Mutual Investment Services (together, “Defendants” or “Northwestern”) for nearly twenty years. On August 15, 2016, Plaintiff filed a one-count putative class action complaint alleging that Northwestern’s method of compensating agents violates the New Jersey Wage Payment Law (“NJWPL”). ECF No. [1]. According to the complaint, Defendants misclassified him and other insurance agents as independent contractors and deducted certain expenses from their commissions in violation of the NJWPL. Id. at 57– 58. After Defendants’ request to brief summary judgment prior to class certification was granted, see ECF No. [58], the parties cross-moved for summary judgment, ECF Nos. [61] and [66] (“Motions”), on Plaintiff’s individual claim. The Court has reviewed the Motions and all papers filed in support and opposition, and no oral argument was held pursuant to Federal Rule of Civil Procedure 78. For the reasons set forth below, Defendants’ Motion for Summary Judgment is GRANTED and Plaintiff’s Motion for Partial Summary Judgment is DENIED. Case 2:16-cv-04981-WJM-MF Document 81 Filed 05/06/19 Page 2 of 12 PageID: 1663 I. FACTUAL BACKGROUND1 The following facts are undisputed unless otherwise noted. Defendant Northwestern Mutual Life Insurance Company is a life insurance company headquartered in Milwaukee, Wisconsin. Plaintiff’s Counterstatement of Material Facts, ECF No. [66-2] ¶ 1. Defendant Northwestern Mutual Investment Services, LLC is its wholly owned broker/dealer. Riedl Tr. at 6–8. Defendants’ core business is underwriting, issuing, and servicing insurance policies. ECF No. [66-2] ¶ 2. Defendants do not sell their products from headquarters in Wisconsin nor through direct marketing, bank affiliations, or the internet. Id. ¶ 4. Instead, Defendants use a “General Agency” sales model in which an independent contractor known as a “General Agent” operates a local field sales office. Id. ¶¶ 5–7. The general agent, in turn, enters into contractual arrangements with individual sales agents termed “Special Agents” or “Financial Representatives.” Id. As an alternative to this model, under certain circumstances, the Northwestern may appoint a representative of the company to “operate the local agency” as a “cashiership.” Id. ¶¶ 8–9; see ECF No. [66-15] at 6. Whether the local field office is operated by a general agent or as a cashiership, financial representatives are generally responsible for developing their own client lists and soliciting applications for insurance. ECF No. [66-15] at 2. From 1996 to 2016, Plaintiff was a Northwestern financial representative. In early 2010, Plaintiff entered into a superseding “Full-Time Special or Soliciting Agent’s Contract” effective February 1, 2010 with the Seery Financial Group LLC, a general agency owned and operated by general agent Robert Seery (“the Seery Agency”). Id. ¶ 11. Plaintiff also entered into an “Amendment” to that agreement on January 22, 2010. See ECF No. [66-15], [72-2] (together, with the Full-Time Special or Soliciting Agent’s Contract, “the Walfish Contract”). The Walfish Contract includes the following provisions: 4. Relationship – Agent shall be an independent contractor and nothing herein shall be construed to make Agent an employee of the Company [Northwestern], General Agent [Robert Seery], or First Party [Seery Agency]. Agent shall be free to exercise his own judgment as to the persons from whom he will solicit Applications and the time, place and manner of solicitation, but the Company from time to time may adopt regulations respecting the conduct of the business covered hereby, not interfering with such freedom of action of Agent. 1 The Court notes that Plaintiff has filed a separate lawsuit against the Defendants here and Northwestern employee Matthew Holleran in the Southern District of New York for wrongful termination under the New Jersey Law Against Discrimination, N.J. Stat. § 10:5-12(l). See Walfish v. Holleran et al., Civil Case No. 7:16-cv-05534-KMK (S.D.N.Y). Although the record before the Court contains substantial information that relates to the wrongful termination claim, the Court only recounts those facts relevant to the claim asserted here. 2 Case 2:16-cv-04981-WJM-MF Document 81 Filed 05/06/19 Page 3 of 12 PageID: 1664 … 6. Exclusive Dealing – (a) the Agent agrees to submit to the Company for approval all Applications secured by him/her for life insurance, annuity contracts or disability income insurance policies, except Applications with respect to persons who are then insured by the Company to the limit which it will issue on them or who are otherwise not acceptable for insurance by the Company or who have been found by the Company to be insurable only at higher than standard premium rates which are unacceptable to the applicants. However, this provision shall not apply to Applications for Section 79 group term life insurance, individual or group health insurance, credit life, liability, fidelity, surety and travel accident insurance or mutual fund shares. Agent is deemed to be a full-time life insurance salesperson and is expected to concentrate his/her sales efforts on behalf of the Company. … 8. General Duties – Agent shall solicit Applications within the territory, and shall procure the issuance of life insurance policies and annuity contracts in an aggregate amount and on a number of lives satisfactory to the First Party and at least equal to the minimum requirements established by Company for licensure. He shall collect the initial premiums on such policies and contracts. .2 … 13. Expenses – Agent shall pay all expenses incurred by him in the performance of this agreement. 14. Conduct – Agent shall comply with all applicable laws and regulations and shall so conduct himself as not to affect adversely the business, good standing or reputation of himself, the First Party, or the Company. ECF No. [66-15] at 2–3. The Walfish Contract also sets forth the terms for payment of Plaintiff’s commissions and for termination of the agreement. Id. From 2010 to 2016 (the “Relevant Time Period”), Plaintiff sold insurance under this contract and filed taxes as a sole proprietorship called “Fred Walfish Insurance.” ECF No. 2 The language of paragraph 6 and 8 as reprinted here reflects the changes agreed to by Plaintiff, Seery Agency, and Northwestern under the Amendment. 3 Case 2:16-cv-04981-WJM-MF Document 81 Filed 05/06/19 Page 4 of 12 PageID: 1665 [66-2] ¶ 14; 87–92; see also ECF Nos. [61-10], [61-13].3 During this time, he characterized himself as an “outside salesman” who sold both Northwestern policies and policies of approximately twenty other companies to “[his] clients.” Walfish Tr. at 30–32, 35–36, 96, 103. Some years Plaintiff received significantly more income from non-Northwestern products, and in some years, he received a larger percentage of his income from Northwestern products. ECF No. [66-2] ¶¶ 52–56; 87–90; see also [61-10], [61-13]. However, the record reflects that his Northwestern commissions comprised no more than one-third of Plaintiff’s overall annual commission compensation during the Relevant Time Period. ECF No. [66-2] ¶ 55. Plaintiff testified that within his assigned territory he had no restrictions on which clients he pursued or for which clients he submitted applications. Id. 35–36; see also ECF No. [66-2] ¶ 28. Rather, Plaintiff was required to develop his own prospects and client lists, and no clients were provided to him by Northwestern. ECF No. [66-2] ¶ 29. Plaintiff testified that Northwestern approved his clients’ applications before issuing insurance products and that Plaintiff was contractually required to recommend Northwestern products over a similar competitor’s product, unless the competitor’s product was in the client’s best interest. Id. ¶ 30. At times during the Relevant Time Period, a significant portion of Plaintiff’s sales were for products in which Northwestern had no offerings, such as health insurance policies. Walfish Tr. at 829–30. Plaintiff was expected to meet certain minimum sales levels. ECF No. [66-2] ¶ 87. Both Plaintiff and other deposed witnesses from Northwestern testified that failure to meet those minimums would not necessarily result in termination of a financial representative’s contract, but rather could also result in a waiver of the minimums, a probationary period, or a monetary penalty. Id. ¶ 87; see also [61-16] at passim and Walfish Tr. at 229–31, 241. Plaintiff further testified that he was required to keep certain records regarding the suitability of his product recommendations; to maintain his work email signature, business cards, and voicemail with accurate information; to complete certain continuing education and compliance requirements; to attend an annual compliance review and annual staff meeting; and to comply with a “Field Compliance Manual.” Id. ¶¶ 22, 28, 34–35. During the Relevant Time Period, Plaintiff rented an office from either the Seery Agency or its successor cashiership. Plaintiff testified that “I can’t give you any kind of a routine that I kept in terms of being in and out of the office,” spent “plenty” of days out of the office, had “not a clue” how much time he spent in his rented space. Walfish Tr. at 94, 96–101. The parties agree that Plaintiff determined his own schedule, scheduled his own appointments, and maintained his own calendar. ECF No. [66-2] ¶ 40.